We’ve been discussing the different strategic moves you can make next as this year comes to a close.
This is part 9 in a 30 blog series on strategy, so please checking out posts #1 through #8 to get caught up.
One strategic move you can make is to focus on a narrower market. For example, if you’re a manufacturer you could focus on just one industry. If you’re a marketing company, you could focus on one vertical, like hair salons. Focusing on a smaller set of customers allows you to charge more and be more profitable.
To illustrate, I created a quick comparison in Google Sheets. It is possible to do less revenue, yet to be more profitable at the bottom line.
You can see in the model, only a 14% increase in pricing and a 10% increase in gross margin, allows you to have $1M less in revenue, yet have a bigger net income. This is why companies pursue this strategy.
Your numbers may be different, but this is an analysis you should be doing.
So if you’re worried that you may lose customers, that could be true, but wouldn’t you rather have more profit in the end?
In the next series of blog posts, we’ll talk about the broader strategic planning process.
As always, if you need help developing your strategy, contact us.